Race to the top: Lufax in Singapore

Asia is the heart of the rapidly growing FinTech movement. Singapore is one of the countries in the region vying for the top spot as Asia’s FinTech hub. With Singapore constantly getting closer to being the industry’s hub in Asia, it is not surprising that there is competition from other regions within Asia – particularly Hong Kong.

With the rise of the FinTech movement in Asia, it is known that China has the most rapid development in the industry. One Chinese firm, Lufax, is an online internet finance marketplace and P2P lender, headquartered in Shanghai, and is an associate of China Ping An Group. Just recently, Lufax was given permission to launch an international wealth management platform in Singapore by the Monetary Authority of Singapore. The platform will launch in August.

Lufax’s new platform will offer simple fund products aimed at Chinese customers with assets overseas before eventually gearing its products towards international clients. This is the first time the Monetary Authority of Singapore has granted a license to a Chinese FinTech company, putting pressure on Hong Kong – Singapore’s main contender – as the competition heats up. However, the license given to Lufax is offshore, allowing just Chinese and Southeast Asian consumers to invest in overseas markets using ETFs, thus Lufax cannot sell their products to domestic Singaporean customers as of yet.

Nevertheless, one of the main reasons for Lufax’s move in Singapore rather than Hong Kong was due to regulation. Singapore has developed a clear and established regulatory regime, with a single regulator. In comparison, Hong Kong has a system of multiple regulators, making the FinTech process more tedious and less attractive to potential investors. This was one of the main reasons Lufax decided to set up this platform in Singapore rather than Hong Kong. With Lufax being granted the licence to operate, Singapore is gaining the upper hand over Hong Kong, as this movement will potentially attract investment to nurture financial technology and innovation in the region.

So what does this mean for Lufax? Lufax aims to first focus on multiple Asian markets, particularly in the near future, and eventually seek expansion in other regions in the world. This development will enable diversification of assets for Chinese consumers, as well as widen Lufax’s customer base due to the attractiveness – to predominantly Chinese consumers – of investing overseas. Additionally, Lufax aims to develop robo-advisory services for their international and Chinese platforms. Developing robo-advisory will lower future costs, encouraging more consumers, as well as improving Lufax’s already large bottom line.

Further, we can expect an increase of FinTech investments in Singapore in the near future, due to their simpler regulatory scheme compared to other nations. However, there is the question of whether this development will boost or harm Singapore’s push to become a FinTech hub in the future. As other FinTech players see the ease of operation, it is anticipated that they will race to establish platforms in Singapore, since like Lufax, they will not have an obligation to serve Singaporean customers. However, despite Lufax choosing Singapore, there is still a promising future for FinTech in Hong Kong, especially as Lufax will still be using products from the region.